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Does banks’ systemic importance affect their capital structure and balance sheet adjustment processes?
Bakkar,Yassine De Jonghe,Olivier Tarazi,Amine
Bakkar,Yassine
De Jonghe,Olivier
Tarazi,Amine
Abstract
Frictions prevent banks to immediately adjust their capital ratio towards their desired and/or imposed level. This paper analyzes (i) whether or not these frictions are larger for regulatory capital ratios vis-à-vis a plain leverage ratio; (ii) which adjustment channels banks use to adjust their capital ratio; and (iii) how the speed of adjustment and adjustment channels differ between large, systemic and complex banks versus small banks. Our results, obtained using a sample of listed banks across OECD countries for the 2001–2012 period, bear critical policy implications for the implementation of new (systemic risk-based) capital requirements and their impact on banks’ balance sheets, specifically lending, and hence the real economy.
Description
Date
2023-06
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Publisher
Research Projects
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Keywords
capital structure, speed of adjustment, systemic risk, bank regulation, lending, balance sheet copmposition, G20 - General, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, G28 - Government Policy and Regulation, SDG 10 - Reduced Inequalities
Citation
Bakkar, Y, De Jonghe, O & Tarazi, A 2023, 'Does banks’ systemic importance affect their capital structure and balance sheet adjustment processes?', Journal of Banking & Finance, vol. 151, 105518. https://doi.org/10.1016/j.jbankfin.2019.03.002